The Slow Unwind of the CFPB
Congress established the Consumer Financial Protection Bureau (the “CFPB”) as part of the Dodd-Frank Act in 2010, which was adopted after and to address the causes and effects of the 2008 economic crisis. Among other purposes, the agency was intended to bolster and consolidate the regulation of consumer protection which, previously, was divided among multiple federal regulatory agencies. Given the power of the entities it regulate, the agency was shielded from political influence as an “independent agency” authorized specifically by Congress (like the Securities and Exchange Commission and certain others), insulated to a limited extent from the influence of the executive branch. The Trump administration shut down the agency and fired its employees early in the new administration; however, a court decision reversed this action as outside the scope of the Executive Branch’s powers. As a result, the agency’s employees were reinstated and the CFPB limps on, albeit with little efficacy and with only minimal hope for an ultimate reprieve.
The CFPB has always been controversial among the businesses it regulates. The CFPB has adopted controversial regulations among business groups in seeking consumer protection from abuse and exploitation, including its 2017 regulations governing payday lending and reigning in abuses in that area, rules regulating and limiting banks’ ability to charge "junk fees" like overdraft and late payment fees on consumer accounts, and rules seeking to protect consumers laboring under medical debt. The agency also sought to regulate financial services and related industries’ contractual clauses that put consumers at a disadvantage relative to the business.
In February, 2025, the Trump administration closed down the CFPB abruptly, telling its workers to stay home and ceasing its work entirely. The workers were abruptly fired. That decision was deemed by a federal district court to be outside the power and ability of the Executive Branch, particularly given the agency’s independent agency status and protections intended to prevent just such an Executive action. The court reasoned that because the agency was created by a law – Congressional action – it would take a revocation of that law by Congress to terminate the agency and its mission.
However, in August 2025, the DC Circuit Court of Appeals reversed that decision and allowed the Trump administration’s firings and closure efforts with respect to the CFPB to proceed. The three-panel appellate panel ruled 2-1 (a split between the two Trump appointees and the one Obama appointee) that the termination of the CFPB’s budget and employees was not a termination of the agency but a decision regarding allocation of resources, which is within the purview of the Executive Branch.
Given the appellate decision, the CFPB will likely be dismantled and the rules it adopted and enforced will be rescinded. This is a significant win for a wide variety of industries that had been within the agency’s purview, including financial services, credit, payday lending, etc. The effects of the CFPB’s demise will be felt in the market – by companies in their ability to loosen practices and compliance and engage in practices deemed dubious by the CFPB, and by consumers in the loss of a means of legal protection.
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